Exercise 1811 Income reporting and breakeven analysis LO P2

Exercise 18-11 Income reporting and break-even analysis LO P2

Blanchard Company manufactures a single product that sells for $280 per unit and whose total variable costs are $224 per unit. The company’s annual fixed costs are $879,200.

(1) Prepare a contribution margin income statement for Blanchard Company at the break-even point.

(2) Assume the company’s fixed costs increase by $142,000. What amount of sales (in dollars) is needed to break even?

	BLANCHARD COMPANY Contribution Margin Income Statement (at Break-Even) Amount Percentage of sales

Solution

CM ratio = (280-224)/280= 20% Break even sales = 879200/20%= $4396000 1 BLANCHARD COMPANY Contribution Margin Income Statement (at Break-Even) Amount Percentage of sales Sales $4,396,000 100% Variable costs 3,516,800 80% Contribution margin 879,200 20% Fixed costs 879,200 Net income 0 2 Break-Even Point in Dollars Choose Numerator: / Choose Denominator: = Break-Even Point in Dollars Total fixed costs / Contribution margin ratio = Break-even point in dollars 1021200 / 20% = 5106000